Big Sky Cairn

Senator Max Baucus is all over the news bragging up the stimulus package that he oversaw which includes tax rebates of between $300-600 for all taxpayers (double that for married couples). Rest assured, you’ll hear about this all year long whenever tax policy comes up. Ever wonder why we’re getting tax “rebates” instead of “cuts”?

This year, American taxpayers will file their taxes by April 15. They will determine how much they owe and send their owed taxes or receive their rebates. Then, between May and July, after this entire transaction has completed, Uncle Sam will send qualifying taxpayers (most of them) a letter telling them that they have a rebate coming. Then, a week later the Federal government will send them another letter - this time with the rebate check. Seem a bit redundant?

It is, and that redundancy is expensive. Here’s how much - in administrative dollars only - it cost Baucus to give you a rebate instead of a credit/cut.

Cost of mailing the rebate notice: $41,800,000.
Cost of mailing the rebate check: $42,000,000 (conservatively)
Estimated total expense to the taxpayer: $84,000,000.

Beyond this, there’s a cost to the economy from the lag between when people pay their tax and when they get their rebate. Taxpayers must front the cash to Uncle Sam for the time between when they pay their taxes and receive the rebate check. In other words, the tax rebate is taking money out of the economy for 30-90 days at the exact time that we need it most.

It would have made more sense fiscally and economically to provide taxpayers with $600 tax credit which would 1) credit any outstanding balance owed to the IRS and/or 2) get added to an existing refund? For the taxpayer, this would have accomplished the same thing as sending the rebates separately except it would have saved over $80,000,000 in administrative fees and infused the money into the economy without first having pulled it out.

Baffled? Don’t be.

Remember this is an election year and the political cost of a tax credit/cut instead of a rebate would have been the inability for Max Baucus to remind you again and again how generous he is with your own money.

The political cost of a tax credit/cut would have been explaining why a tax cut that’s good for the economy this year isn’t also good for the economy next year and the year after that.

In a way, Max Baucus using your tax dollars to generate ammunition for his campaign.  I guess he was feeling bad that he wasn’t using your money for fancy dinners and posh hotel rooms.

Via Matt Singer, Tester has decided to forgo the normal policy of not taking sides in his own party’s primary and instead endorse Jim Hunt (who isn’t expected to beat Rehberg until 2010).

I love how Tester waxes eloquent about being an underdog. If memory serves, he was also a pretty significant underdog in his own primary against John Morrison. Lucky for him, his party didn’t jump on the front-runner’s bandwagon in the first two weeks and he was able to win the nomination and eventually the seat. I guess Tester probably realizes that 7th choice is better than 8th or 9th… although if you do the math the difference is pretty small.

As the mistakes keep mounting, Tester has one-and-out written all over him.

The politics of the financial crisis are going to be messy, but one thing is for sure, Democrats will push for more market regulation under the cloak of helping the free market. This is what I like to call it the FREE, or Federally Regulated Economic Exchange, market philosophy.

The FREE market is a union of free market rhetoric, leftist moralism, and collectivist economics all exercised through a political body. The FREE market relies on the idea that economic freedom equates to personal freedom; however, it adds the thought economic freedom is not possible without the intervention of government. In the FREE market, multi-national corporations are assumed to be bad players in the global marketplace. Thus, the tax and regulatory code must be altered to limit the ability of the free market evolve on its own, independent of the wishes of the political body.

Additionally, in the FREE market, the individual is never to be blamed for poor choices if they make less than $84,000/year. However, if an individual makes more than $200,000 they are assumed to be predators who made their money through the work of others and not because of any effort that individual put forth.

Take the mortgage crisis for example; in the free market, the high rate of foreclosures is due to a convergence of factors including individuals seeking loans for more than their ability to pay and the incorrect belief that home prices will always be on the rise. Under the FREE market, the individual is absolved from all responsibility and the problem arises from a supposed lack of regulations on banks and mortgage lenders.

Hillary Clinton sums up the FREE market school of economic thought pretty well;

I just believe that there’s got to be a healthy tension among all of our institutions in society, and that the market is the driving force behind our prosperity, our freedom in so many respects to make our lives our own but that it cannot be permitted just to run roughshod over people’s lives as well.

Carol notes that Google - in support of Earth Hour - has made their screen black. On their explanation page, they claim that modern monitors use the same energy to display white as black, so their effort is purely symbolic.

As to why we don’t do this permanently - it saves no energy; modern displays use the same amount of power regardless of what they display.

Of course, the metaphor of changing Google black to Earth Hour is appropriate. In both cases, the intentions are certainly good. But in both cases the results are actually counterproductive.

While it may seem that a black screen would use less energy than a white one, this is not the case. It is also not the case that a black screen uses the same amount of energy. In fact, it is a black screen - like the one that Google put up for Earth Hour - that will use the most energy overall.

As for the notion of Earth Hour - saving the planet from the real and imagined threats that it faces is a pretty big job. Convincing people that they are actually contributing by turning off their lights for an hour in the middle of the day on a Saturday - well that’s giving them an easy way out. Why do more? I celebrated Earth Hour!

What’s next? Earth Minute?

It was always there, but this theme didn’t have the logo or link. So I added it down there at the bottom of the sidebar.

Out of curiosity - who out there reads blogs via RSS/Atom feeds? I started about a month ago and I’ll never go back. It’s amazing how many sites have feeds. Keeps me busy for hours!

Seventh-choice Jim Hunt (who, according to MT Democrats won’t win the 2008 election until 2010) isn’t getting any national press - but “his” borrowed plan for defeat withdrawal in Iraq is. 42 candidates (a “candidate” is even less important than the least powerful members in the 535 voting members of Congress) have jumped off the cliff together which makes it newsworthy - a bit like lemmings are newsworthy when they jump off cliffs.

A few problems. For example:

The starkest difference between the group’s proposal, dubbed a “Responsible Plan to End the War in Iraq,” and those embraced by many senior Democrats and the party’s presidential candidates is that it rejects the idea of leaving U.S. troops on the ground to train Iraqi security forces or engage in anti-terrorism operations. The group instead calls for a dramatic increase in regional diplomacy and the deployment of international peacekeeping forces, if necessary.

Now, I’m not an expert, but I do know that seniority is rather important in Congress. Leadership - especially in the House of Representatives - calls the shots and freshman pay their dues by voting how leadership tells them. So a group of freshmen hatching a plan that even their own Party’s leadership thinks goes too far is naive at best at best and outright disingenuous at worst.

Of course, Democratic Leadership would never be party to a lie for political gain, so they’re careful to qualify the Responsible Plan for defeat withdrawal with this bit of tactical brilliance:

“Democrats are united in our need to bring change in Iraq,” said Doug Thornell, spokesman for the Democratic Congressional Campaign Committee. “It’s up to the individual candidates to determine how to best do that for their district.”

Someone please explain to me what a 435 part district-by-district Iraqi strategy looks like. Last I checked this was a national policy that could - by definition - never be addressed by any individual district.

Unless Thornell let slip a Freudian truth. Thornell isn’t worried about the battle in Iraq - which doesn’t have any district-by-district aspects at all - and is actually talking about the political battle in the voters booth this November - which is about nothing but district-by-district tactics. Thornell could just have easily said, “Democrats are united in our need to [preserve or increase our majority],” said Doug Thornell, spokesman for the Democratic Congressional Campaign Committee. “It’s up to the individual candidates to determine how to best do that for their district.”

It makes a lot more sense that way, doesn’t it?

I read a recent Billings Gazette opinion on the Bear Stearns buyout by JP Morgan. I have to say, I chuckled a little bit at the resident economists on the Gazette editorial board. My favorite line was that Bush bailed out his capitalist buddies on Wall Street.

On March 9, the Federal Reserve, along with JP Morgan announced a $236 million deal to buyout Bear Stearns assets. The fall of an 80 year big five investment firm took less than 72 hours, one of the largest economic collapses in history. Bear Stearns had been a leading pusher of the now, essentially, worthless portfolios of mortgage backed securities.

Under the terms of the deal, JP Morgan will buy out BSC for $2/share, and assume risk on all but the riskiest $30 billion in mortgage securities. That $30 billion in paper will be backed by the Federal Reserve under an expansion of a depression era law allowing the government to intervene in extreme circumstances.

Somehow, as alluded to at the start, this has been construed as a bailout to the shareholders of Bear Stearns.

The two largest stakeholders in Bear Stearns were UK billionaire Joseph Lewis with a 9.6% stake and Chairman/former CEO Jimmy Cayne with a 5% share.

Joseph Lewis bought up approximately 15.9 million shares last summer and fall at the average sale price of $104, for a grand total of around $1,650,000,000. Now it is hard to be sympathetic to the financial woes of anyone with the ability to spend $1.65 billion on anything. However, that investment, per the fed brokered deal is now worth a little over $30 million. Even under the revised JP Morgan buyout (more on that below) , Mr. Lewis is looking at a loss of over $1.5 billion in under 12 months.

From market close on the Friday before the original deal was reached, Bear Stearns was trading at $34, by the time markets opened Monday, that stock was worth $2 a share. Or to put in terms of Mr. Lewis, this was a loss of $500 million in one weekend.

Again this is not to drum up sympathy, it is to dispel the myth that the fed’s actions were a bailout for investors. This was a supervised fire sale. Unlike the Long Term Capitol Management deal in the ’90’s; investors in Bear Stearns suffered huge losses. I am comfortable that the fed stepping in here will not create moral hazards against risky investments.

In response to the protests of shareholders, the original $2/share sale price has been increased to $10/share. I am in the school of thought that this is a good thing. Under the new terms, JP Morgan will assume $1 billion in risky Bear Stearns securities that were previously backed by the fed, and more importantly the new deal better reflects Bear Stearns market value. A total sale price of $236 million was insanely low; the property value of the Bear Stearns HQ in Manhattan could sell for five to ten times over that price.

The end product of these two weeks of minor chaos is that the Federal Reserve is more tied to Wall Street’s fortunes than it has been since the depression. In addition to the $29 billion in Bear Stearns assets, two other major firms have taken loans totaling $28 billion under the six month window opened by the fed.

Despite the risk to taxpayers, this needed to be done. Our economy right now depends on lending. When lenders balk at backing securities pushed by a big five firm we are in trouble. Hopefully this move will shore up confidence so the crisis on mortgage-based securities passes and we can continue on.

Some may think these problems are solely those of the Wall Street fat cats, but it does filter down to Montana. MHESAC failed to sell another round auction bonds. These bonds are some of the safest possible investments, yet lenders balked at repurchasing them. The inability to secure lines of credit from lenders showed it showed itself most spectacularly in Bear Stearns, but it does ripple down to us here in Big Sky Country.

One assumes that Jim Hunt is running for Congress because he fancies himself a leader, right? So why has he spent the first month of his campaign following in the established footprints before him.

How can I illustrate my point? How about with an illustration.

What you are seeing here is the color palette - from websites and presumably printed materials - of your US House of Representatives candidates with incumbent Republican Rehberg on the left and 7th Choice Democrat Hunt on the right. See anything… I don’t know… similar?

It’s worth noting that Rehberg has been blue and yellow since 2000 (he a Cats fan or what?). I guess it’s been working pretty good for him, so Hunt decided to copy him on - get this - a platform of change.

Small thing right? Probably, but consider this. Colors are a pretty fundamental element of branding, which is one of the most fundamentally vital things that a campaign does. Quick - who’s shipping your box in a brown truck? What about a red and yellow one? Blue, orange and white? See what I’m saying?

So right out the gate, Hunt has ceded a major part of his brand to Rehberg. He’s starting the game with a deficit, and he’s throwing interceptions. Thanks to something as simple copying his opponent’s color scheme, Hunt won’t be able to gain as much ground with yard signs, billboards or full-color newspaper ads since in the fraction of a second he has to capture his audience he won’t differentiate himself from the popular incumbent.

Not that it will matter - he wasn’t going to win this year anyway.

Just added the Dextra Feed with some help from Craig at MTPolitics.  It was actually a lot easier than I was expecting it to be.  Thanks for putting this together.  He promised to ask the other members of the feed if they think that Big Sky Cairn is a good fit [crosses fingers].

While I’m on the subject, I’m also going to formally ask for some link-love from other Montana blogs.  Huge thank you to Electric City Weblog and Last Best Place who both introduced us formally.  According to Google, we’re in a few blog-rolls, too which is appreciated.  If you like what we’re doing here, why not give us a shout-out - let folks know we’re here!

We like readers (”vanity, definitely my favorite sin“) and comments and things that make us feel like we’re loved.

John Lewis is still hurting (on behalf of children, of course) from the fallout of The Joke. I’d love to sit in on that doctor’s appointment.

JL: Ow, doc. It really hurts.
MD: Interesting. Does it hurt when I do this?
JL: It hurts no matter what you do. Oooh, the pain. Can you give me something for it?
MD: Well, ordinarily I’d suggest a strong dose of “getting over it” but my diagnosis is that you addicted to the attention and the so-called pain is just a mental construct for your next fix.
JL: For the children, doc!

But let’s for a second assume that Lewis is really experiencing the pain he says that he is - and that this isn’t just political theatrics. In that case, the cause of that pain is the content of the joke (that has been interpreted in some way that I fail to comprehend as an insult to the gay community). This presumption holds that the joke is quite damaging to the gay community in Montana which begs the question: why is Lewis the only one still sending letters to the editor to remind everyone of something that he himself admits would otherwise be forgotten?

Would a restaurant owner send a letter to the editor reminding people of a health code violation? Would a celebrity send a letter to the editor reminding people of a bad review for a movie she was in last year? Of course not because those reports are legitimately damaging and bringing them back into the forefront of public discourse would re-open the wound.

The way I see it, Lewis is either very dishonest or very stupid. If the joke was truly damaging and he keeps bringing it up, he’s stupid. But smart money is on dishonesty - his outrage is feigned.

Is to too much to ask Lewis to shoot straight with Montana?